INVESTMENT ADVISER
Legg Mason Fund Adviser, Inc. REPORT TO SHAREHOLDERS
Baltimore, MD FOR THE YEAR ENDED
DECEMBER 31, 1995
BOARD OF DIRECTORS
John F. Curley, Jr., Chairman
Edmund J. Cashman, Jr., President
Richard G. Gilmore
Charles F. Haugh THE
Arnold L. Lehman LEGG MASON
Dr. Jill E. McGovern TAX
T.A. Rodgers EXEMPT
TRUST, INC.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Boston Financial Data Services
Boston, MA
PUTTING YOUR FUTURE FIRST
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
COUNSEL
Kirkpatrick & Lockhart LLP
Washington, D.C.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Baltimore, MD
THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
THIS REPORT IS NOT TO BE DISTRIBUTED UNLESS PRECEDED OR ACCOMPANIED BY A
PROSPECTUS.
LEGG MASON WOOD WALKER, INCORPORATED
111 South Calvert Street
P.O. Box 1476, Baltimore, MD 21203-1476
410 (Bullet) 539 (Bullet) 0000
[recycled logo] PRINTED ON RECYCLED PAPER
LMF-030 [Legg Mason Funds logo]
<PAGE>
TO OUR SHAREHOLDERS,
On December 31, 1995, the Legg Mason Tax Exempt Trust had $225
million invested in a diversified portfolio of high quality,
short-term municipal securities with an average weighted maturity of
48 days.
The Federal Reserve Board lowered short-term interest rates twice
during 1995 after raising them throughout 1994. Lower interest rates
are favorable for business and consumers but unfavorable for owners of
money market funds and other short-term investments. As this letter is
written, the Tax Exempt Trust's seven day yield is 2.76%.
The Trust's income dividends continue to be exempt from federal income
tax and may be partially exempt from state income taxes as well, depending
upon your state of residence. The Trust does not purchase investments whose
income is subject to the federal alternative minimum tax.
We appreciate your ownership of the Trust, and hope you will let
us know whenever you have questions or suggestions.
Sincerely,
/s/ John F. Curley, Jr.
John F. Curley, Jr.
Chairman
February 9, 1996
<PAGE>
STATEMENT OF NET ASSETS
LEGG MASON TAX EXEMPT TRUST, INC.
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Alabama -- 3.3%
Montgomery Industrial
Development Board
(General Electric
Project) Series 1990
VRDN
(Aaa/P1, AAA/A1+)
$ 7,505 2/1/96 to 3/27/96 3.40 to 3.65%A $ 7,505
Arizona -- 2.4%
Salt River Project
Agricultural
Improvement & Power
District TECP (P1, A1+)
5,400 2/14/96 to 2/21/96 3.60 to 3.75 5,400
Colorado -- 2.2%
Colorado (State of) TRAN
Series 1995 (SP1+)
5,000 6/27/96 4.50 5,019
Connecticut -- 0.8%
Connecticut Health &
Educational Facilities
Authority (Yale
University)
Series L & O TECP VRDN
(Aaa/VMIG1, AAA/A1+)
1,850 3/6/96 3.60A 1,850
Florida -- 8.0%
Gainesville (City of)
Utilities Systems
Series C TECP (P1, A1+)
4,005 2/15/96 to 2/20/96 3.65 to 3.70 4,005
Jacksonville Electric
Authority Series A TECP
(P1, A1+)
4,300 1/19/96 to 3/27/96 3.50 to 3.55 4,300
Pinellas County Florida
Health Facilities
Authority (Bayfront
Medical Center, Inc.
Project) Refunding
Revenue Bonds
Series 1989 VRDN
(Aaa/VMIG1, AAA/A1)
600 1/3/96 4.90A 600
Putnam County
Development Authority
PCR Bonds (Seminole
Electric Cooperative,
Inc.) Series H-1 & H-2
VRDN
(Aa3, AA-/A1+)
2,100 1/3/96 4.65A 2,100
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Florida -- Continued
Sunshine State
Governmental Financing
Commission
Series 1986 VRDN
(Aa2/VMIG1)
$ 6,900 2/16/96 to 2/22/96 3.55 to 3.65%A $ 6,900
17,905
Hawaii -- 2.6%
Hawaii Department of
Budget & Finance
(Queens Medical Center)
Series 1985B VRDN
(Aaa/VMIG1, AAA/A1)
5,800 1/3/96 5.15A 5,800
Indiana -- 5.6%
Jasper County PCR Bonds
(Northern Indiana
Public Service Company
Project) Series 1988A
VRDN (Aa2/VMIG1,
AA/A1+)
2,000 2/29/96 3.80A 2,000
Mount Vernon (City of)
PCR (General Electric
Company Project)
Series 1989A
(Aaa/P1, AAA/A1+)
4,000 2/29/96 3.40A 4,000
Petersburg (City of) PCR
Bonds (Indianapolis
Power & Light Company
Project) Series 1991
VRDN
(Aa3/VMIG1, A+/A1+)
3,000 2/22/96 3.60A 3,000
Sullivan (City of)
Floating/Fixed Rate PCR
(Hoosier Energy Rural
Electric Cooperative,
Inc. Project) Series
1985 L-3 & L-6
(A1/P1, AA-/A1+)
3,495 1/31/96 to 2/13/96 3.65 to 3.75A 3,495
12,495
Iowa -- 1.6%
Louisa County PCR (Iowa-
Illinois Gas & Electric
Company Project) Series
1986A VRDN
(A1, A+/A1+)
3,600 1/3/96 5.00A 3,600
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Kentucky -- 2.8%
Jefferson (County of)
PCR Bonds (Louisville
Gas and Electric
Company Project) Series
1993 A VRDN
(Aa2/VMIG1, AA/A1+)
$ 2,500 1/30/96 3.80%A $ 2,500
Trimble (County of) PCR
Bonds (Louisville Gas
and Electric Company
Project) Series 1992 A
VRDN
(Aa2/VMIG1, AA/A1+)
3,800 1/31/96 3.50A 3,800
6,300
Louisiana -- 4.7%
Lake Charles Harbor and
Terminal District Port
Facilities Revenue
Bonds (Conoco Inc.
Project) Series 1984
VRDN (Aa3/P1, AA-/A1+)
5,700 1/2/96 5.95A 5,700
Saint Charles (Parish
of) PCR Refunding Bonds
(Shell Oil Company
Project) Series 1992 B
VRDN
(Aa2/VMIG1, AAA/A1+)
4,800 1/2/96 5.95A 4,800
10,500
Maine -- 1.3%
Maine (State of) TAN
(MIG1, SP1+)
3,000 6/28/96 4.50 3,011
Maryland -- 16.0%
Baltimore County
Consolidated Public
Improvement BAN Series
1995 (P1, A1+)
10,000 1/10/96 to 2/7/96 3.35 to 3.70 10,000
Baltimore County PCR
Revenue Refunding Bonds
(Baltimore Gas &
Electric) Series 1985 C
VRDN
(A2/VMIG1, A/A1)
2,500 1/8/96 3.80A 2,500
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Maryland -- Continued
Howard County
Consolidated Public
Improvement BAN
Series A (P1, A1+)
$ 1,600 3/29/96 3.60% $ 1,600
Maryland (State of)
Department of
Transportation
Consolidated
Transportation Bonds
Refunding Series 1993
(Aa, AA)
1,000 6/15/96 3.63 1,000
Maryland Health & Higher
Educational Facilities
Authority (Pooled Loan
Program Issue) Series
1985A & 1985B VRDN
(Aa3/VMIG1)
10,800 1/3/96 4.95 to 5.00A 10,800
Maryland Health &
Higher Educational
Facilities Authority
(Pooled Loan Program
Issue) Johns Hopkins
University Series C
(P1, A1+)
2,000 4/5/96 3.70 2,000
Montgomery County BAN
Series 1995 (P1, A1+)
8,000 1/5/96 to 3/7/96 3.45 to 3.50 8,000
35,900
Massachusetts -- 4.5%
Massachusetts Health &
Educational Facilities
Authority Revenue Bonds
Harvard University
Issue Series L VRDN
(Aaa/VMIG1, AAA/A1+)
10,150 2/8/96 to 2/28/96 3.40 to 3.70A 10,150
Minnesota -- 6.7%
Regents of the
University of Minnesota
Series 1985 G
(Aa/VMIG1, AA/A1+)
1,250 2/1/96 3.65A 1,250
Series 1985 I VRDN
(Aa/VMIG1, AA/A1+)
7,675 1/9/96 to 3/29/96 3.50 to 4.00A 7,675
</TABLE>
3
<PAGE>
STATEMENT OF NET ASSETS -- CONTINUED
LEGG MASON TAX EXEMPT TRUST, INC.
DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Minnesota -- Continued
Rochester (City of)
Health Care Facilities
Revenue Bonds (Mayo
Foundation/Mayo Medical
Center)
Series 1992 A & C VRDN
(AA+/A1+)
$ 6,100 1/10/96 to 1/11/96 3.70%A $ 6,100
15,025
Montana -- 3.2%
Forsyth (City of) PCR
(Portland General
Electric Company
Colstrip Project)
Series 1983 A
(Aaa/P1, AAA/A1+)
2,800 1/3/96 4.90A 2,800
Series 1983 D
(Aa1/P1, AA+/A1+)
1,000 1/3/96 4.90A 1,000
Series 1984 (Aa1/P1)
3,400 1/3/96 4.90A 3,400
7,200
Nebraska -- 2.2%
Omaha Public Power
District (P1, A1+)
5,000 2/16/96 3.65 5,000
North Carolina -- 0.4%
Winston-Salem Water &
Sewer Revenue Bonds
Series 1988 VRDN
(Aa/VMIG1, AA/A1+)
1,000 3/6/96 3.65A 1,000
Pennsylvania -- 5.9%
Allegheny County
Hospital Development
Authority (Presbyterian
Hospital) Series A, C &
D VRDN
(Aaa/VMIG1, AAA/A1+)
10,050 1/4/96 5.00A 10,050
Delaware County IDA
(Scott Paper Company
Project) Series 1984 D
& E
VRDN (Aa2/P1, AA/A1+)
2,400 1/3/96 5.00A 2,400
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Pennsylvania -- Continued
Pennsylvania Health &
Higher Educational
Facilities Authority
Carnegie Mellon
University VRDN Series
1995 C
(AA-/A1+)
$ 800 1/2/96 6.00%A $ 800
13,250
South Carolina -- 3.4%
Berkeley County PCR
Bonds (Amoco Chemical
Company Project)
Series 1994 VRDN
(Aa1/VMIG1, AAA/A1+)
2,600 1/2/96 5.95A 2,600
South Carolina Public
Service TECP (P1, A1)
4,950 2/6/96 to 2/14/96 3.65 to 3.80 4,950
7,550
Texas -- 7.1%
Capital Industrial
Development Corporation
PCR Bonds (Motorola,
Inc. Project) Series
1984 VRDN (AA/A1+)
2,500 1/3/96 5.25A 2,500
Dallas (City of)
Waterworks and Sewer
Systems Series A TECP
(P1, A1+)
5,303 2/9/96 to 3/8/96 3.65 to 3.70 5,303
Harris County Health
Facilities Development
Corp. Hospital Revenue
Bonds (St. Luke's
Episcopal Hospital
Project)
Series B VRDN
(AA/A1+)
1,000 1/2/96 6.00A 1,000
Houston (City of) TRAN
Series 1995
(MIG1, SP1+)
3,000 6/27/96 4.50 3,011
Texas (State of) TRAN
Series 1995A
(MIG1, SP1+)
4,000 8/30/96 4.75 4,019
15,833
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Utah -- 0.9%
Intermountain Power
Agency Variable Rate
Power Supply Revenue
Bonds Series 1985F VRDN
(Aa1/VMIG1, AA+/A1+)
$ 2,000 3/15/96 3.75%A $ 2,000
Virginia -- 2.2%
Chesterfield County IDA
PCR Bonds (Virginia
Electric and Power
Company) Series 1987A
VRDN
(A3/VMIG1, A-/A1)
4,000 2/7/96 3.85A 4,000
Prince William County
IDA PCR Bonds (Virginia
Electric and Power
Company) Series 1986
VRDN
(A3/VMIG1, A-/A1)
1,000 2/8/96 3.40A 1,000
5,000
Washington -- 3.2%
Washington State Housing
Finance Committee
Series 1988B VRDN
(AAA/A1+)
7,250 1/3/96 5.30A 7,250
Wisconsin -- 4.2%
Carlton (Town of) PCR
Refunding Bonds
Series 1991 B & C
(Wisconsin Power and
Light Company
Projects) VRDN
(Aa2/VMIG1, AA/A1+)
1,700 1/2/96 6.10A 1,700
</TABLE>
<TABLE>
<CAPTION>
Par Rate Value
<C> <S> <C> <C>
Wisconsin -- Continued
Oak Creek (City of) PCR
Series 1986 (Wisconsin
Electric Power Company
Project) VRDN
(Aa3/P1, AA)
$ 1,700 1/3/96 5.00%A $ 1,700
Wisconsin (State of)
Operating Notes
Series 1995 (MIG1, SP1+)
6,000 6/17/96 4.50 6,023
9,423
Wyoming -- 2.4%
Lincoln County PCR Bonds
(Exxon Project) Series
1984A & D VRDN
(Aaa/P1, AAA/A1+)
1,500 1/2/96 5.90A 1,500
Lincoln County PCR Bonds
(PacifiCorp Project)
Series 1991
(Aaa/VMIG1, AAA/A1+)
3,900 1/9/96 to 1/12/96 3.70 to 3.80A 3,900
5,400
Total Investments, at
amortized cost and
value -- 97.6% 219,366B
Other Assets Less
Liabilities -- 2.4% 5,290
NET ASSETS APPLICABLE TO
224,684 SHARES
OUTSTANDING -- 100.0% $224,656
NET ASSET VALUE PER SHARE $1.00
</TABLE>
A THE RATE SHOWN IS THE RATE AS OF DECEMBER 31, 1995 AND THE MATURITY SHOWN
IS THE LONGER OF THE NEXT INTEREST READJUSTMENT DATE OR THE DATE THE
PRINCIPAL AMOUNT OWED CAN BE RECOVERED THROUGH DEMAND.
B ALSO REPRESENTS COST FOR FEDERAL INCOME TAX PURPOSES.
A GUIDE TO ABBREVIATIONS APPEARS ON THE NEXT PAGE.
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
LEGG MASON TAX EXEMPT TRUST, INC.
INVESTMENT ABBREVIATIONS:
BAN Bond Anticipation Note
IDA Industrial Development Authority
PCR Pollution Control Revenue
TAN Tax Anticipation Note
TECP Tax-Exempt Commercial Paper
TRAN Tax and Revenue Anticipation Note
VRDN Variable Rate Demand Note
MUNICIPAL NOTE, BOND AND COMMERCIAL PAPER RATINGS:
Municipal Notes
MIG1 AND MIG2: Moody's Investors Service, Inc. ratings for state and
municipal notes and other short-term obligations are designated Moody's
Investment Grade (MIG). Notes bearing the designation MIG1 are judged to
be of the best quality and notes bearing the designation MIG2 are judged
to be of high quality (VMIG1 and VMIG2 are ratings for variable rate
obligations).
SP1 and SP2: The two highest municipal note ratings assigned by
Standard & Poor's Ratings Group. A plus (+) sign may be added to the SP1
rating to indicate that an issue possesses very strong credit
characteristics.
Commercial Paper
P1 and P2: Prime 1 and Prime 2 are the two highest commercial paper
ratings assigned by Moody's Investors Service, Inc.
A1 and A2: The two highest commercial paper ratings assigned by
Standard & Poor's Ratings Group. A plus (+) sign designates issues
possessing very strong credit characteristics.
Municipal Bonds
Aaa, Aa, A and Baa: Investment grade bond ratings assigned by Moody's
Investors Service, Inc. A numeric modifier (1, 2, and 3) may be added to
the ratings to indicate high, medium and low relative credit strength,
respectively, within a particular rating category.
AAA, AA, A and BBB: Investment grade bond ratings assigned by Standard
& Poor's Ratings Group. A plus (+) or minus (-) sign may be added to the
ratings to indicate relative credit strength within a particular rating
category.
The Moody's or Standard & Poor's ratings indicated are believed to be
the most recent ratings available at December 31, 1995. These ratings are
not audited by the Fund's independent accountants.
MATURITY SCHEDULE OF PORTFOLIO:
<TABLE>
<CAPTION>
December 31, 1995
Percentage of
Maturity Period Amount/Par Portfolio
(000) (cum)
<S> <C> <C> <C>
1-7 days $ 77,100 35.2% 35.2%
8-30 days 22,975 10.5 45.7
31-45 days 30,550 13.9 59.6
46-90 days 59,553 27.1 86.7
Over 90 days 29,105 13.3 100.0
$219,283 100.0%
</TABLE>
Average Weighted Maturity -- 48 days
6
<PAGE>
STATEMENT OF OPERATIONS
LEGG MASON TAX EXEMPT TRUST, INC.
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
(Amounts in Thousands)
<S> <C> <C>
INVESTMENT INCOME:
Interest $8,922
EXPENSES:
Advisory fee $1,178
Transfer agent and shareholder servicing expense 126
Custodian fee 90
Audit and legal fees 55
Registration fees 51
Reports to shareholders 31
Directors' fees 10
Other expenses 17
1,558
Less compensating balance credits (19)
Total expenses, net of compensating balance credits 1,539
NET INVESTMENT INCOME $7,383
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
LEGG MASON TAX EXEMPT TRUST, INC.
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Amounts in Thousands) 1995 1994
<S> <C> <C>
CHANGE IN NET ASSETS:
Net investment income $ 7,383 $ 5,464
Net realized loss on investments -- (8)
Increase in net assets resulting from operations 7,383 5,456
Distributions to shareholders from net investment income (7,383) (5,464)
Change in net assets from Fund share transactions 2,166 (15,113)
Change in net assets 2,166 (15,121)
NET ASSETS:
Beginning of year 222,490 237,611
End of year $224,656 $ 222,490
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
7
<PAGE>
FINANCIAL HIGHLIGHTS
LEGG MASON TAX EXEMPT TRUST, INC.
Contained below is per share operating performance data for a share of
common stock outstanding, total investment return, ratios to average net
assets and other supplemental data. This information has been derived from
information provided in the financial statements.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
Net investment income .0313 .0223 .0174 .0231 .0386
Dividends paid from net investment income (.0313) (.0223) (.0174) (.0231) (.0386)
Net asset value, end of year $1.00 $1.00 $1.00 $1.00 $1.00
Total return 3.17% 2.25% 1.75% 2.34% 3.93%
RATIOS/SUPPLEMENTAL DATA:
Ratios to average net assets:
Total expensesA .66% -- -- -- --
Net expensesB .65% .65% .69% .73% .69%
Net investment income 3.14% 2.23% 1.74% 2.33% 3.88%
Net assets, end of year (in thousands) $224,656 $222,490 $237,611 $170,046 $176,752
</TABLE>
A PURSUANT TO NEW SECURITIES EXCHANGE COMMISSION REGULATIONS EFFECTIVE
DECEMBER 31, 1995, THIS RATIO REFLECTS TOTAL EXPENSES BEFORE COMPENSATING
BALANCE CREDITS. PREVIOUSLY, THE CREDITS WERE INCLUDED IN THE RATIO.
B THIS RATIO REFLECTS TOTAL EXPENSES INCLUDING COMPENSATING BALANCE
CREDITS.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
LEGG MASON TAX EXEMPT TRUST, INC.
(AMOUNTS IN THOUSANDS)
1. SIGNIFICANT ACCOUNTING POLICIES:
The Legg Mason Tax Exempt Trust, Inc., ("Fund") is registered under
the Investment Company Act of 1940, as amended, as an open-end,
diversified investment company.
Security Valuation
Portfolio securities are valued under the amortized cost method, which
approximates current market value. Under this method, securities are
valued at cost when purchased and, thereafter, a constant proportionate
amortization of any discount or premium is recorded until maturity of the
security.
Dividends to Shareholders
Dividends are declared daily and paid monthly. Net investment income
for dividend purposes consists of interest accrued plus original issue
discount earned, less amortization of market premium and accrued expenses.
At December 31, 1995 dividends payable of $10 were accrued.
Investment Transactions
Investment transactions are accounted for on the trade date and the
cost of investments sold is determined by use of the specific
identification method for both financial reporting and income tax
purposes.
Compensating Balance Credits
The Fund has an arrangement with its custodian bank whereby a portion
of the custodian's fees are paid indirectly by credits earned on the
Fund's cash on deposit with the bank. This deposit arrangement is an
alternative to purchasing overnight investments.
Federal Income Taxes
No provision for federal income or excise taxes is required since the
Fund intends to continue to qualify as a regulated investment company and
distribute all of its taxable income to its shareholders. The Fund has
unused capital loss carryforwards for federal income tax purposes of $26
which expire in 2000 through 2002.
2. FUND SHARE TRANSACTIONS:
The Fund is authorized to issue 2,000,000 shares of common stock with
a par value of $.001 per share. At December 31, 1995, paid in capital
aggregated $224,684. Since the Fund has sold and redeemed shares at a
constant net asset value of $1.00 per share, the number of shares
represented by such sales and redemptions is the same as the amounts shown
below for such transactions:
For the Years Ended December 31,
1995 1994
Shares sold $ 879,501 $ 794,480
Shares reinvested 7,219 5,295
Shares repurchased (884,554) (814,888)
Net change $ 2,166 $ (15,113)
3. TRANSACTIONS WITH AFFILIATES:
Legg Mason Fund Adviser, Inc. ("Adviser"), an affiliate of Legg Mason
Wood Walker, Incorporated, serves as the Fund's investment adviser and is
responsible for the investment management of the Fund's assets. As
compensation for its advisory services, the Fund pays the Adviser a fee,
calculated daily and payable monthly, at an annual rate of 0.50% of the
Fund's average daily net assets. Advisory fees of $99 were payable to the
Adviser at December 31, 1995.
Legg Mason also has an agreement with the Fund's transfer agent to
assist with certain of its duties. For this assistance, Legg Mason was
paid $42 by the transfer agent for the year ended December 31, 1995.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND DIRECTORS OF
LEGG MASON TAX EXEMPT TRUST, INC.:
We have audited the accompanying statement of net assets of Legg Mason Tax
Exempt Trust, Inc. as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and financial highlights for each
of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995 by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Legg Mason Tax Exempt Trust, Inc. as of December 31, 1995, and the results of
its operations, changes in its net assets, and financial highlights for each of
the respective periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
February 1, 1996
10
<PAGE>
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